Give investors at coffee giant Starbucks (SBUX) credit; they are taking some serious potential downsides in stride. News is emerging about competitors putting a lot more strength into their morning operations, focusing on dayparts traditionally ruled by Starbucks even as it tries to be the after-hours “third place” par excellence. And now, one of those major competitors, Dutch Bros. Coffee (BROS), is looking to bring out several new options likely to undercut Starbucks’ operations in a critical daypart. Investors disregarded the whole thing, and sent shares up nearly 2% in Wednesday afternoon’s trading.
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Dutch Bros. Coffee has been expanding, clearing 1,000 locations throughout the United States. Back in 2024, it rolled out a hot breakfast pilot program that proved sufficiently popular to add to more locations. Demand has been strong, and Dutch Bros. Coffee discovered that people like hot food with their coffee. However, one problem emerged for Dutch Bros.; about 285 of its over 1000 units are not set up for hot food, which means either a major moving expense or a loss of potential market.
Interestingly, though, the Portillo’s (PTLO) chain—known for its chocolate cake milkshakes—started its own attempt with breakfast. The pilot program shut down, though, after Portillo’s discovered that prep times in the morning were starting to interfere with its lunch operations. Which is good news for Starbucks–one less competitor in the space will help. But given Dutch Bros.’ advance, it may be cold comfort.
Meanwhile, the Strikes Loom
Looming strikes, meanwhile, are also delivering a bit of a blow to Starbucks, as the union shops under the Starbucks umbrella are considering strikes ahead of one of Starbucks’ biggest days: Red Cup Day. While only a small percentage of Starbucks shops are unionized, striking on Red Cup Day is likely to draw particular notice to a problem that is already getting noticed at the government level.
Union officials like Michelle Eisen have called particular attention to Starbucks’ turnaround plans, which generally require more work for baristas without much help or further compensation. Eisen noted, “Every single day at this company, as of recently, has been very, very difficult to be a barista. You should not be evolving to the point of running your workers to the ground.” Starbucks, of course, has responded in the past that most of its workers love working there, and Starbucks already delivers aggressive benefits packages.
Is Starbucks Stock a Good Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on SBUX stock based on 13 Buys, seven Holds and two Sells assigned in the past three months, as indicated by the graphic below. After a 13.41% loss in its share price over the past year, the average SBUX price target of $95.06 per share implies 8.11% upside potential.
